Monday, November 10, 2008

Did the RM explain "first to default" ?

Dear Mr Tan,
Thank you for taking the time and effort to help the unfortunate minibond investors.

I am disheartened to find out that some of our banks have "thrown out" many cases. Perhaps the "vulnerable" investors could not effectively submit a proper case. Perhaps they could not effectively present the argument that they were misled by the Managers (Relationship) of the banks.

The argument I am presenting is based on the structure of the minibond product, not the companies (i.e, Lehman Brothers) underlying it.

In such cases whereby the minibond investors attempted to demostrate that they had been misled in buying high risk would likely be countered by bank's argument like "Have our sale staffs explain the risks to you?", "The rating of the companies behind minibonds has been AAA, AAB, therefore this is a very safe investment". Indeed, the staffs might have taken efforts to explain the risks but what were the exact risks explained? Who is to argue a rating of AAA and AAB is not safe? And who is to argue a 100+ year old investment bank has no firm foundation? As such, when banks present such facts, how can one not deduce that the minibond is a safe investment?

The case of the minibond is not a case on the companies behind the structured product sold. The high risk was the structure / architecture / design of the minibond itself. This is the risk: FIRST TO DEFAULT BASIS. This means any of the eight underlying entitles fails, the minibond will be terminated and investor receives zero payout in the worst case scenario. This is the reason why it is a risky investment.

So what can the minibond investors do now? Perhaps what they can do now is to answer these 2 questions:

> Had the Relationship Manager explained clearly the risks due to the structure / architecture / design of the minibond?

> Had the Relationship Manager fully and clearly explained the worst case scenario?

If the answers to both questions are "No", the investor may possibly have a better case. The "higher" risk came from the structure / architecture / design of the minibond and not the underlying companies.

Mr Tan, much has been discussed about the fate of the minibond and their investors, I do have a question. What happened to the $500 million dollars (cold hard cash) invested in the minibond?

Regards,


REPLY
The financial institutions are only interested to find any excuse to reject the claim, so as to avoid paying any compensation.

The Monetary Authority of Singapore has asked them to treat their customers fairly. Unfortunately, MAS has not provided specific guidelines and leave it to the discretion of the financial institutions. The outcome is to be expected.

8 comments:

Anonymous said...

The questions were framed in their favour. You should have a set of your own questions.
They asked you leading questions that they know your answers will be in their favour. They know you would be honest. It is unfair.

Anonymous said...

"Compensation? What Compensation?"

Richard Sim said...

I have lost so much in these products that I cannot sleep at night. The FIs have just sent me a final reply rejection letter. My lawyer has advised that I cannot win the case due to the iron clad documents.

Anyone has any other ideas?

ym said...

you as investors were the insurer... the claim event was LEH going broke...

the 500 millions has been paid out as claims to the insured ie usually banks or some speculator..

Anonymous said...

Richard Sim said...

I have lost so much in these products that I cannot sleep at night. The FIs have just sent me a final reply rejection letter. My lawyer has advised that I cannot win the case due to the iron clad documents.

Anyone has any other ideas?

1:20 AM


Your story is not new.

In fact its so not new, pple are still falling into it.

I hope the later pple can learn a lesson.

Anonymous said...

Hi ym,

Your comment :

"you as investors were the insurer... the claim event was LEH going broke...

the 500 millions has been paid out as claims to the insured ie usually banks or some speculator..

9:29 AM"

AND do you know which investment bank pulled the rug on Lehman so that Rating Agencies downgraded Lehman, at same time hedge funds shorted Lehman shares, then downgraded again, all coordinated into a death spiral for Lehman ? Answer : JP Morgan Chase and others. And who are the ones collecting our insurance monies - JP Morgan and other investment banks and hedge funds. What an impressive gambling den that struggling casinos must be hoping to get into.

Anonymous said...

Go AGM and keep asking questions for 24 hours..

Anonymous said...

"Anonymous said...

Go AGM and keep asking questions for 24 hours..

4:54 PM"




Yes with that mindset, I supposed everyone in that room with you will be as confident as YOU ARE the Cows are surely coming home this time round.

Blog Archive